Top 10 Annuity Stories of 2016

The wild ride was reflected in our top 10 annuity stories for the year. Of course, the Department of Labor fiduciary rule was the most significant influencer on annuities.

Firms and advisors alike scrambled to figure out what the rule meant for their business. That propelled many of the stories we wrote on the DOL into our most-read section.

Otherwise, any stories we wrote about annuity trends attracted plenty of interest. It seemed everyone was curious about what is around the corner with these products.

These topics are sure to remain popular and drive our 2017 coverage. But first, here are the top 10 annuity stories of 2016:

1. 6 IMOs Apply for ‘Financial Institution’ Status Under DOL Rule

This story from August recapped the six independent marketing organizations, or IMOs, who initially applied to the Department of Labor to become “financial institutions."

Earning the financial institution designation would clear the path for independent insurance agents to sell commission-based insurance and financial products under the Labor Department’s Best Interest Contract Exemption, or BICE.

In other words, it holds the key for advisors and firms operating closely to business as usual under the new rules.

The DOL hasn’t yet decided on the IMO applications for financial institution status.

2. DOL Final Rule Change Could Hurt FIA Sales

We already had reported that the DOL was considering a surprising change: moving FIAs into the much-tougher Best Interest Contract Exemption. The BIC requires more disclosures and liability, as well as a signed contract with the client.

Our readers knew where to find the analysis of this significant change.

3. Allianz: DOL Might Pull FIAs Out Of BICE

A month after the DOL rule was published, executives remained hopeful that FIAs would be removed from the BIC exemption as quickly as they appeared there.

4. 18 Insurance Marketers Apply For DOL Exemption

In this October story, we tracked down all the independent marketing organizations that applied for a special exemption to sell fixed indexed annuities under the Department of Labor’s fiduciary rule.

The exemption would grant the marketing organizations “financial institution” status. This would allow agents under contract with the marketing organizations to sell commission-based FIAs.

Seeking financial institution status is considered a “must have” for insurance marketers looking to recruit independent agents and advisors to sell FIAs, a market that surpassed $53 billion in sales last year.

5. American Equity: DOL Rule Threatens Independent Annuity Agents

Publication of the DOL rule sent shock waves through the annuity industry. Nearly everyone had an opinion on the future of the industry, with not many optimistic about it.

The liability associated with the rule’s Best Interest Contract (BIC) could cause carriers to pivot away from independent insurance agents and toward broker/dealers and banks instead, Matovina said in this April story.

Obviously, the treatment of FIAs in the fiduciary rule drew plenty of interest in the spring of 2016. And when prominent lawyer James Jorden, shareholder of Carlton Fields Jorden Burt, said he could find no reason for adding FIAs to the BIC, readers took notice.

Jorden went so far as to say the DOL should have re-issued the rule since a major change was added after the substantial comment period had ended. Jorden would go on to represent Market Synergy Group in a lawsuit against the DOL, which was decided in the agency’s favor.

7. Insurance Marketing Organizations Feel The DOL’s Freezer Burn

By June, the dust had settled and many industry folks had finally digested the 1,000-plus page fiduciary rule. Senior Writer Cyril Tuohy caught up with several IMO executives for their opinions.

Marketing organizations manage thousands of independent insurance agents, which are the primary channel for fixed indexed annuities. FIAs have outsold all other categories of fixed annuities for many years.

How they fit into the DOL rule, and whether the rule even remains under a Trump administration, remains up in the air.

8. Will Floating Rate Annuities Shake Up the Market?

The product is a fixed annuity that credits an extra fraction of a percentage based on the London Interbank Offered Rate, or LIBOR, on top of the guarantee period base rate.

The new annuity, marketed as RateTrack, offers a five-year guarantee period option which yields a base rate of 2 percent and another 0.63 percent based on the three-month LIBOR rate. Total credited interest rate in the first year: 2.63 percent.

9. Some Annuity Execs Say DOL Rule Prevents Independent Agent Sales

As the calendar turned to May, many industry executives began to wonder where the liability rested for annuity sales under the fiduciary rule.

In this story, S. Craig Lindner, co-CEO of American Financial Group in Cincinnati, said that unless an insurance company decides to take on the fiduciary obligation of the distribution, insurance companies do not necessarily assume fiduciary liability.

Others disagreed with this position. Those discussions on liability continue today.